Amazon To Buy Whole Foods For $13.7 Billion

Posted - June 27 201705:28

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Amazon To Buy Whole Foods For $13.7 Billion

Amazon.com said Friday that it would buy Whole Foods Market for $13.7 billion, its biggest acquisition ever and a huge move into the grocery business it's been trying to crack for a decade. The transaction is expected to close during the second half of 2017.

Amazonagreed to pay $42 a share in cash for the organic-food chain, including debt, a roughly 27 percent premium to the stock price at Thursday's close.

Amazon will gain a footprint of 456 supermarket stores in North America and Britain with the acquisition of Whole Foods, boosting its delivery capacity and allowing it to compete directly with U.S. chains such as Kroger Co and Albertsons LLC.

A crowded local grocery market became more interesting - and probably more competitive - as online retail powerhouse Amazonannounced Friday that it will buy organic foods specialist Whole Foods, which now has stores in Washington Twp., Mason and Cincinnati. Until now, Amazon has largely focused its grocery efforts around its Amazon Fresh subscription service, which promises quick food delivery for online orders.

Amazon is already playing with innovative ways to make grocery store runs more convenient. This being said, many of these large grocery retailers do have advantages of their own.

Whole Foods has had a reputation of high prices and has been derided sometimes as "Whole Paycheck". Whole Foods Market employs almost 87,000 people.

$3B: Drop in food and drink sales at America's brick-and-mortar stores during this year's first quarter.

Whole Foods, which will keep operating stores under its name, said in an email to customers that it will maintain the same standards under Amazon, including bans on artificial flavors and colors and antibiotics in hens producing its eggs.

Shares of competing retailers Kroger Co., Target, and Walmart all fell Friday after the deal was announced, while Amazon shares were up by 2.4 percent.

When Jana Partners LLC in April said it had raised its stake in Whole Foods in April and pushed for a sale of the company, Whole Foods interviewed several investment banks to hire an adviser to help defend against the activist hedge fund.

Then there's Amazon, the online juggernaut that has turned its gaze to food retailing.

Kyle Bunch is with R/GA, a marketing, advertising and consulting firm right across from the Whole Foods headquarters. It will take over a natural and organic grocer pioneer with 456 stores, a mecca for young, high-end shoppers, that has been struggling to rein in prices and integrate technology. Numerous bottom tier retailers will more than likely have to close stores, or get sold to the larger companies as they will not be able to compete with the drop in prices.

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It also needed to enter that enormous market, especially if it seeks global domination, because food gets you everywhere. He added that these are likely the higher-income households who tend to buy more expensive brands and cuts of meat.

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